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2016 (10) TMI 314 - ITAT MUMBAI

2016 (10) TMI 314 - ITAT MUMBAI - TMI - Short deduction of TDS - TDS u/s 194C OR 194I - PSF and X-Ray charges - AO held that the payment made by the assessee was covered by the provisions of section 194-I and treated the assessee in default for not deducting the taxed at higher rate - Held that:- Payment made by the assessee to MIAL cannot be treated rent, as per the provisions of section 194-I of the Act. There was no use of land by the assessee for both the charges collected by it. Thus, the b .....

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nt Member and C. N. Prasad, Judicial Member Revenue by : Shri Manjunath Swamy-CIT -DR Assessee by : Shri Dhanesh Bafna and Ms. Anusha Singh ORDER Per Bench Challenging the order, dated 18/04/2011, of the CIT (A)-14, Mumbai, the Assessing Officer(AO)and the assessee have filed appeals/cross objections for the above-mentioned three AY. s, raising various grounds. As the issues involved in the appeals /Cross objections(CO. s. ) are common, so, for the sake of convenience, we are adjudicating all th .....

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xercises and Passenger Service Fees(PSF). The assessee was asked to explain as to why the TDS was deducted at 2% instead of 10%. Accordingly, a show cause notice, dated 24/ 01/ 2011, was issued calling for various details and to explain as to why the assessee should not be treated as an assessee in default for short deduction of TDS u/s. 201 of the Act on expenses on X-Ray and PSF. In response to the show cause notice, the assessee stated TDS on X-Ray charges and PSF were correctly being deducte .....

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that only one e-TDS return was filed for the expenses incurred by it, that it had furnished the lower deduction certificate from the DCIT, TDS(2)(1), Mumbai issued to MIAL, that MIAL had obtained the exemption certificate u/s. 197 of the Act for all the receipts from various Airlines u/s. 194-I of the Act, that the payments made by the assessee was for use of the premises of MIAL and for other different facilities provided by the Airport Authorities, that the payments made by it were covered u/s .....

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rt deduction on PSF- ₹ 29, 13, 676/- Interest u/s. 201(1A)-Rs. 11, 99, 294/-. Short deduction on account of X-Ray charges in details of payment were worked out as follow: Short deduction on account of X-Ray charges- ₹ 66, 54, 152/- Interest u/s. 201(1A)- ₹ 30, 60, 910/-. In response to the notices issued u/s. 201(1)/201(1A)for 24Q and 26Q for all the quarters, the assessee requested for some time to submit to the details. The AO calculated the defaults on processing of statemen .....

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30 crores. 3. Aggrieved by the order of the AO, the assessee preferred an appeal before the First Appellate Authority (FAA). Before him, it contended it had a separate License Agreement for using part of the premises of MIAL, that it was paying licence fee for the same to MIAL separately, that other services and facilities provided by MIAL had no connection with the use of premises, that same were distinct and separately identifiable services and facilities, that the AO had erred in not appreci .....

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d by MIAL did not fall within the purview of any specific section, that same had been treated in the residual category falling within the purview of section 194-C of the Act, that the rate of TDS applicable u/s. 194-C should be applied, that section 194-I was not applicable, that the action of the AO taxing the payments of PSF/X-Ray charges as rent was totally arbitrary and without any authority of law, that MIAL had included those payments in its total income computed under the Act and had acco .....

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/201(1A)of the Act can be raised on the payer without first verifying as to whether the receiver had discharged the income tax liability on the income received from the payer as per the provisions of section 191 of the Act, that the order passed by the AO was bad in law and deserved to be quashed. The assessee relied upon the cases of Jagran Prakashan Ltd. (345ITR288), Mahindra and Mahindra Ltd. (22DTR361), Vedanta Math(55 SOT470) and stated that the AO had not follow the provisions of section 1 .....

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sessee contended same represented fees paid by the passengers for the provision of security and passengers facilitation services provided by MIAL, that assessee was required to collect PSF from embarking passengers and remit it to MIAL, that it was acting merely as a collecting agent of MIAL. It submitted a copy of notification dated 05/07/2004, issued by Government of India to the Airports Authority of India in connection with levy of PSF charges and stated that same constituted a statutory col .....

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ion component (35% of the PSF), that the amount was collected by MIAL and was kept on an escrow account, that MIAL would make payment to Central Industrial Security Force, that both the charges were not linked to rent payments for uses of premises alleged by the AO, that it had leased premises at the Mumbai International Airport from MIAL under a license agreement, that it had duly deducted tax u/s. 194-I of the Act on payment for lease of office premises, that the payment of X-Ray charges and P .....

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d, building, furniture, fittings, plant, machinery or equipment, that what was contemplated by the word Rent used in the definition of Rent under the section 194-I was that payer must operate or utilise the premises. Without prejudice, the assessee further argued that it was not liable to pay the principal amount of TDS where MIAL had discharged its own income tax liability on income received from the assessee, that assessee was liable to pay interest u/s. 201(1A) only till the date of payment o .....

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orms completed by the assessee, that it had already filed revised TDS returns in which the errors were corrected, that assessee could not be treated as an assessing the fourth for the principal amount of TDS on technical default, assessee would be liable to pay interest only till the date of payment of taxes by the payee or date of filing of return of income by the payee and not till date of order, that the AO had incorrectly computed interest on the alleged TDS default till the date of assessme .....

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/s. 194C of the Act from payments of X-Ray charges and PSF charges to MIAL. He referred to Rule 88 of the Aircraft Rules and order, dated 09/05/2006 of the Ministry of Civil Aviation dealing with PSF and held that the payments were primarily borne by the embarking passengers, that the assessee was merely acting as a collecting agency, that PSF charges were collected by it in fiduciary capacity and were handed over to airport operators, that the PSF was basically a consideration paid by the passe .....

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held that PSF payments could not be categorised as rent u/s. 194-I of the Act. With regard to X-Ray charges, the FAA held that it was in the nature of contractual liability of the assessee for a routine service, that it had entered into an agreement with MIAL to avail skin services to X-Ray the cargo carried by it to/from Mumbai airport, that the assessee would pay the screening fee at the pre-agreed rates based on the total control of cargo, that there was no hiring of any specific machine by .....

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ve(DR) supported the order of the AO and stated that both the charges were part of the rent paid by the assessee. The Authorised Representative (AR) argued that assessee had deducted tax at source at the rate of 2%, as per the provisions of section 194C, that the AO had promptly invoke the section 194-I. He referred to the case of Jet Airways (India) Ltd (40 taxmann. com 178) and the Circulars No. 75 and 1, dated 08/08/1995 and 10/01/2008 respectively. 5. We have heard the rival submissions and .....

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with regard to hiring of that premises, that it was deducting tax as per the provisions of section 194-I of the Act for the said premises. In our opinion PSF/X-Ray charges cannot be treated as rent as envisaged by section 194 I. In the case of Japan Airlines Co. Ltd. & others(377 ITR 372)the Hon bel Apex Court has defined the word Rent as under: The expression rent is given a much wider meaning u/s. 194-I than is normally known in common parlance. In the first instance, it means any payment .....

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tever name called and any other agreement or arrangement have the widest import. Likewise, payment made for the use of any land or any building widens the scope of the proviso. A bare reading of the definition of rent contained in the Explanation to section 194-I would make it clear that in the first place, the payment, by whatever name called, under any lease, sub-lease, tenancy, is to be treated as rent . That is rent in traditional sense. However, the second part is independent of the first p .....

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ommon parlance. The facts of the case were that the assessees were foreign airline companies which were members of the International Air Transport Agreement and during the relevant year serviced inward and outbound air traffic to and from India. The Airports Authority of India levied certain charges on them for landing and parking their aircraft. For payment of landing and parking charges of their aircraft, the appellants deducted tax at source u/s. 194C of the Act, @ 2% and deposited it with th .....

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anding and take-off services as well as for parking of aircraft were not for the use of the land . These charges were for services and facilities offered in connection with the aircraft operation at the airport, which included providing of air traffic services, ground safety services, aeronautical communication facilities, installation and maintenance of navigational aids and meteorological services at the airport. The Airport Economics Manual and the International Airports Transport Agreement a .....

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On the contrary, it was the facilities, that were to be compulsorily offered by the Airports Authority of India in tune with the requirements of the protocol, which was the primary focus. For example, special technology was required for the construction of runways for smooth landing and take-off of the aircrafts. Technical specifications for lighting, safety area and markings were stipulated. Designs and quality of pavement on these runways were also to be taken compliant. The Airports Authorit .....

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provisions of section 194-I of the Act. There was no use of land by the assessee for both the charges collected by it. Thus, the basic ingredient i. e. use of land, plant, machinery etc. is missing and hence it can safely be held that the assessee had rightly deducted the tax at the rate of 2%, as per the provisions of section 194- C of the Act. As far as PSF charges are concerned, we want to mention that in the case of Jet Airways (supra) the Tribunal has held as under: The facts under conside .....

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sublease or tenancy or any other agreement or arrangement or any nature of lease or tenancy or rent. It would not be out of place to consider the CBDT Circular No. 1/2008, dated 10th, January, 2008 relating to the clarification regarding the applicability of provisions of section 194 - I to payments made by the customers on account of cooling charges to the cold storage owners, wherein the CBD had the occasion to consider the representations in respect of the issue, whether the customer five the .....

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